Principles of Insurance and Contractual Obligations Quiz

Principle of Indemnity ensures that the insured should be restored to the same financial position as before the loss occurred.

Insurance is considered a bilateral contract because both parties, the insurer and the insured, have mutual obligations.

Moral hazard refers to the increased risk of loss due to the insured's behavior, such as intentional actions to trigger insurance claims.

An endorsement is a change or addition to an insurance policy's terms and conditions made after the policy has been issued.

A deductible is the initial amount of a claim that the insured must pay before the insurer starts to cover costs.

Actual Cash Value is the value of an insured item considering depreciation, typically used in property insurance claims.

Insurable interest ensures that the policyholder has a financial stake in the insured property, preventing gambling or profiting from loss.

Subrogation allows the insurer to pursue recovery from third parties responsible for the loss after compensating the insured.

A rider is an amendment to an insurance policy that provides additional coverage beyond the standard terms.

Underwriting involves assessing risks associated with insuring a person or property and determining the terms of coverage.

Reinsurance helps primary insurers manage their risk exposure by transferring a portion of their liabilities to other insurers.

Co-insurance is the percentage of covered expenses the insured must pay after the deductible, with the insurer covering the rest.

Fiduciary responsibility refers to the obligation of insurers to manage policyholder funds carefully and in their best interests.

Underinsured motorist coverage helps cover costs if the at-fault driver's insurance limits are insufficient to pay for damages.

The Principle of Utmost Good Faith requires both parties to disclose all relevant information honestly and transparently.

Human insurance is not a common term in business; typically, it refers to life or health insurance.

An exclusion is a provision in an insurance policy that eliminates coverage for specific risks, conditions, or items.

Concurrent causation refers to a scenario where multiple perils combine to cause a single loss or damage, complicating claims assessment.

Tort refers to a civil wrong that causes harm or loss, forming the basis for legal liability in insurance law.